Sad

Yellen today: “This extraordinary commitment is still needed and will be for some time. The scars from the great recession remain…reaching our goals will take time.”

No Ms. Yellen, your organization’s “extraordinary commitment” is not needed and “reaching our goals” will not “take time” if we can simply get you and Obama out of the way.  It is you and it is Obama’s social democracy that provide the retardants.

Robert Craven

UK Consumer Attitude

When last addressing the UK on Feb/26 we wrote that, “Finally and key remains the consumer. It is well known that we have a record number of people in work, and of course we have the spark to consumption provided by the housing bonanza, and we have a shopper who will resort to increased leverage to linger in the mall.  These things are known and priced in.  It is ongoing attitude which is missing, most models.” 

Sure enough, today’s Feb Retail Sales print blew expectations away (+1.8%, vs +0.3%, consensus). And why?  Because UK analysts have missed consumer attitude; they still cannot capture consumer attitude in their models. But then how could they when they are speeding along at 90 with their eyes in the mirror?

Want to capture the headline on consumer activity? Go ahead; be polite and read the in-house economist’s report if you must but then as soon as you have a moment, head out to the mall.  Ask a question or two. It works wonders.


Robert Craven

 

Illusion

Headline this am: “US Stocks Gain on Durables Report.”  Ah, the innocent little darlings. 

See our last sketch for a quickie on why we are going nowhere.

Desperate, children at the helm lock onto a Durables headline as if it were a life preserver.  In fact, today’s Feb Durables print was weak because non-defense capital goods orders, ex aircraft, were down again, following a downward revision for January. 

Come on now. Business equipment investment is going nowhere and we know why – a statist administration and an interventionist Fed.

Businesses are flush you say? Right, after their 2013 borrowing binge but guess where most of that went – stock buybacks.  We haven’t talked to one business leader who intends to increase equipment spending, or payroll much either, for that matter.  These guys are not stupid for goodness sake.


Robert Craven
 

That Was Easy

In recent lectures and meetings with clients we have highlighted the steps required to fire the US economy. These meetings take about 10 minutes; then we’re all off for a good IPA.

Background:  We have an over-reaching administration and a complicit Fed. Most members of the FOMC are willing to keep quiet and go along with the Chair, ignoring the incest close at hand. Family reunions in the Deep South run a distant second.

For years, for us, the FI auction market offered up adventure and fair play, with victories and mishaps along the way; it was a rough game but in an arena where everybody knew the rules. There were, to borrow from TR, “great devotions and great enthusiasms.”

Now we find this arena to be a sordid place; the game is rigged by crony capitalists turned planners who pick the winners.

The Fed and the administration are co-conspirators. Their foray at the gaming table suits both very well, but not most Americans.

The key for a return to a vibrant American economy is for the Fed to regain its credibility by targeting 2% inflation. That was easy.

The “dual mandate” is a redundancy; it’s stupid.  Stop the QE bit, stop the kumbaya bit with the investment crowd, reduce interest on reserves to 0% (in two steps), adopt a reasonable FF’s target and then stand back. When we see 2% inflation (headline PCE), fine; lift FF’s.

Things don’t have to be so terribly complex; this – complexity – is indeed the final refuge for the scoundrel, or in this case, for the conjoined heads of Fed and administration.

Our advice to Obama is to stop the incessant meddling, a signature of his party; our advice to FOMC members is to stop the assault on seniors before you’re all put under house arrest, or worse.

Let’s put this reeking chapter behind us.


Robert Craven

 

Settled, Isn't It?

Come on now, we all know what happened: Paulson and Bernanke sold Congress a bill of goods; Congress took it all in and sold it to the masses – the clowns who screwed up must be bailed, for the sake of all of us.  If not, an apocalypse was sure to follow.  What was sure to follow was in fact a normal cleansing process and a grounded economy.

And now we have a Fed which cannot get out of its own way - by refusing to sit on its hands when we told it to (wasting all that air fare!) - and an overreaching administration which by instinct puts government ahead of everything else. Isn’t that about it folks? Doesn’t that just about explain this zombie economy of ours?  We think so. If you need more, see Garrett and Rhine’s piece in the Jan/Feb/2011 St Louis Fed Review, “Economic Freedom and Employment Growth in the US.”  Just in case that publication cannot be found on your coffee table, witness today’s NFIB Feb small business optimism index, which tanked – hiring plans and economic outlook both in the cellar. The cascade of regulations and higher taxes that are the signature of the left explains this result.

Our colleagues tell us, “Now don’t get into politics.” Of course we’ll “get into politics.”  We’ll get into anything that plays the key role of economic retardant - in this case, planners knowing what’s best for the rest of us.

There will be no acceleration, no escape velocity; that is, not until there is another great big crisis. Yellen as Fed chair is a crisis but not the right kind. Obama-at-the-helm is a crisis (unless E-Z style social democracies are your thing, or more exactly, if France is your thing) but Obama doesn’t even register on most radar screens any longer.  We need something grander to expose this house of cards; that should be just around the corner.


Robert Craven

The Weather - A Secret?

We all know that some key economic reads for January and February have come in on the side of weakness. This surprise has been attributed to weather. Some prints for this time frame, such as new home sales and some manufacturing reads did ok but Jan Retail Sales, Jan NFP (hiring & wage gains) and Feb services were in the tank. But what is important for our purposes is that these reads were far below expectations, below street consensus.

If one is interested in capturing price change it is not the absolute result that counts; we don’t spend a lot to time worrying about that; it is only the result vs consensus view.  Duh. It is easier to isolate the flaw common to street estimates than it is to work in reverse. We’d rather spend that time in the garden.

So, were recent weather patterns a secret to the analytical crowd? Doubt it. Let’s just go way out on a limb and venture that unless these guys live under a rock, then the impact of ice and snow was woven into their estimates - they’re not anxious to miss on purpose. But still there was a significant miss for jobs and spending.

This means that relative weakness in the US economy – something analysts have yet to pick up - has been camouflaged by the weather. And this reality, this far along in the “recovery” is perfectly consistent with our long-held view that the US will under-perform this cycle; it will under-perform vs that which is at this moment priced in.


Robert Craven